News Release

Strong Telecom and Wireless Volumes Drive Double-Digit Bell Atlantic Earnings Growth

Adjusted EPS Up 11.3 Percent for Quarter, 11 Percent For Year

January 26, 1999

David Frail
212-395-7726

NEW YORK, NY — Bell Atlantic Corp. (NYSE: BEL) today announced its fourth consecutive year of double-digit earnings growth, with 1998 adjusted earnings per diluted share increasing 11 percent to $2.72 from $2.45 in 1997. Adjusted net income available to common shareowners rose 11.6 percent to $4.3 billion.

Fourth quarter adjusted EPS increased to 69 cents, up 11.3 percent from 62 cents in fourth quarter 1997, with adjusted net income available to common shareowners rising to $1.1 billion, up 11.8 percent from $970.9 million.

Adjustments and reported results are described below.

"Bell Atlantic had an excellent 1998," said Chairman and CEO Ivan Seidenberg. "We extended our track record for double-digit earnings growth to a fourth consecutive year even while integrating Bell Atlantic and NYNEX following our merger. At the same time, we positioned ourselves to sustain this momentum and even accelerate it by preparing to enter the richest new markets in telecommunications."

"Our Telecom Group benefited from a full year of robust across-the-board demand for voice and data services and invested for growth, both through long distance entry and through new data facilities and services, including our new Infospeed DSLsm offering. Our Wireless Group contributed nearly one-third of last year's earnings growth and showed once again that it is one of the world's strongest portfolios of domestic and international wireless assets.

"Our performance was significantly enhanced by the cost savings, capital efficiencies and revenue gains we generated from the Bell Atlantic-NYNEX merger. These synergies helped us make significant progress toward becoming the kind of diversified, multi-service provider that will participate fully in the phenomenal growth of communications markets worldwide. Our merger of equals with GTE will be the most significant step in this transformation, and we're looking forward to completing that transaction and getting to the next competitive level."

Adjusted revenues increased 4.5 percent for the quarter, to $8.1 billion, and 3.6 percent for the year, to $31.6 billion. Proportionate revenues from Bell Atlantic's Telecom and Global Wireless businesses, which include Bell Atlantic's share of revenues from unconsolidated wireless investments, rose 6.5 percent for the quarter and 5.6 percent for the year. Adjusted expenses increased 3.5 percent for the quarter and 2.2 percent for the year.

Adjusted results exclude charges for special items. These totaled 4 cents per share in fourth quarter 1998 for merger transition costs and 2 cents per share in fourth quarter 1997 for charges partially offset by certain one-time gains. Charges in 1998 totaled 86 cents per share, primarily for completion of a retirement incentive program, write-downs of certain international investments, and merger transition charges. Charges in 1997 totaled 89 cents per share, largely for costs related to the Bell Atlantic-NYNEX merger.

Reported fourth quarter net income available to common shareowners was $1.0 billion, or 65 cents per share, compared to $940.0 million, or 60 cents per share, in fourth quarter 1997. Reported 1998 net income available to common shareowners was $2.9 billion, or $1.86 per share, compared to $2.5 billion, or $1.56 per share, in 1997.

Telecom Highlights

With demand for communications services, particularly data and value-added services, continuing at robust levels, Telecom Group revenue increased 3.5 percent over fourth quarter 1997. The number of access lines in service grew 4.3 percent to 41.6 million, which, combined with continued demand for data circuits, increased the number of voice-grade equivalents (access lines plus data circuits) in service by 11.6 percent to 56.9 million. Access minutes of use increased 5.9 percent in the quarter and 7.8 percent for the full year.

More than two-thirds of Telecom revenue growth for both the quarter and the year came from sales of data services. Data revenues, including those from high-bandwidth packet-switched and special access services and Bell Atlantic's network integration business, exceeded $2.3 billion for the year, 31 percent over 1997 levels. The demand for digital connectivity and value-added features continued to grow in all markets. In the enterprise (large business) and general business markets:

  • The number of "DS0" circuits in service (digital, high-bandwidth and packet-switched services as measured in 64-kilobit voice-grade equivalents) increased more than 38 percent over year-end 1997, to 16.6 million.

  • Bell Atlantic ended 1998 with almost 519,000 basic rate Integrated Services Digital Network (ISDN) lines in service, up 19 percent from year-end 1997, and the number of primary rate ISDN channels in service increased 75 percent to nearly 823,000.

In consumer markets:

  • Bell Atlantic ended the year with more than 2 million lines equipped to offer Infospeed DSLsm, the company's high-bandwidth household service. Bell Atlantic plans to equip more than 7.5 million lines for Infospeed by the end of 1999 and approximately 14 million lines by the end of 2000.

  • Vertical service revenues continued to grow as customers purchased new packages combining Caller ID, Return Call, Call Waiting, Home Voice Mail and other features. Caller ID revenues increased 42 percent in 1998, as the number of subscribers increased to 6.3 million, and Home Voice Mail revenues rose 16 percent.

In network services markets:

  • At the end of 1998, Bell Atlantic was providing other carriers with approximately 600,000 resold access lines and 70,000 unbundled loops.

  • Special access revenues for the year increased 22 percent to $1.5 billion.

Adjusted 1998 network operating expenses totaled $20.6 billion, 2.1 percent above 1997 levels, with cash expenses up 1.5 percent. Fourth quarter adjusted operating expenses of $5.3 billion were 3.0 percent above fourth quarter 1997 levels, with cash expenses up 2.9 percent. Among the drivers of expense growth were interconnection payments to competitive local exchange carriers, which increased by approximately $175 million in 1998 over 1997 levels.

Wireless Highlights

Continued strong performance drove Wireless Group financial results to new levels in 1998. Solid fourth quarter gains by Bell Atlantic Mobile, PrimeCo Personal Communications and one of the world's premier international wireless portfolios enabled Wireless to set new marks for proportionate net subscribers, revenues and operating income.

In line with Bell Atlantic's strategy to become a national and global wireless business, international investments and PrimeCo Personal Communications generated nearly 60 percent of the Group's revenue growth in 1998, and international ventures contributed nearly half of the year's net subscriber additions, approximately 1.1 million.

Proportionate subscribers increased more than 35 percent over fourth quarter 1997 to 8.6 million. Proportionate net subscriber additions for the quarter totaled 731,000, 41 percent more than the prior-year period. Net customer additions for the year totaled almost 2.2 million, 35 percent more than in 1997.

Total proportionate revenues increased 27.5 percent in the quarter, to a record $1.3 billion, and totaled $4.6 billion for the year, 25 percent higher than in 1997. Proportionate operating income for the quarter increased 20 percent to $195 million. Full-year operating income totaled $760 million, up nearly 41 percent over 1997.

Bell Atlantic's domestic properties capped a year of sustained growth with a strong fourth quarter. Bell Atlantic Mobile (BAM) added 302,000 customers in the quarter -- 10,000 more than in fourth quarter 1997 -- and grew its subscriber base to 6.2 million, 16 percent above year-end 1997. The introduction of DigitalChoice SingleRate price plans in September helped BAM grow its digital subscriber base to more than 950,000 by year-end. Approximately 40 percent of BAM busy-hour calls were on its digital networks.

Demand for PCS service in the Midwest, Southeast and Southwest fueled strong growth at PrimeCo Personal Communications, with fourth quarter subscriber additions of 196,000 bringing PrimeCo's total subscriber base to 902,000, up 133 percent over year-end 1997. PrimeCo's year-end penetration rate of 2.2 percent of covered POPs was double the year-end 1997 rate.

Other domestic highlights:

  • BAM's total quarterly revenues were $923 million, 13 percent above fourth quarter 1997. Total BAM revenues for the year were almost $3.5 billion, up 12 percent over 1997.

  • BAM's continued focus on expense control reduced acquisition costs per subscriber by 15 percent to $184, compared to $217 in the prior-year period. Cash expense per subscriber for the quarter was $25.

  • BAM operating cash flow for the quarter was $343 million, up 9 percent over the prior-year period. Operating cash flow margin in the fourth quarter was 43 percent and 45 percent for the year. Quarterly operating income of $202 million brought the full-year total to $821 million. Dilution of total revenue per subscriber declined to 3.2 percent in the quarter, nearly a full percentage point lower than the full-year figure of 4.3 percent.

  • Total PrimeCo revenues for the quarter grew 98 percent over fourth quarter 1997 to $154 million. Year-end revenues were $509 million, compared to $208 million in 1997. Average monthly revenue per subscriber was $53 in the quarter, and $57 for the year.

The Group's portfolio of international investments rode the strong popularity of prepaid wireless services and the increasing adoption of wireless as an alternative to landline service to produce a growing share of Global Wireless revenue and operating cash flow.

International proportionate net subscriber additions for the quarter totaled 336,000, almost double the prior-year period. International year-end proportionate subscribers totaled approximately 2 million, up 144 percent over 1997.

International proportionate revenues for the quarter were $276 million, almost double fourth quarter 1997, bringing the year-end total to $856 million, $393 million more than 1997. Proportionate operating income in the quarter grew to $41 million, $24 million over fourth quarter 1997. Quarterly operating cash flow grew to $83 million, totaling $250 million for 1998, 180 percent over the prior year.

Other international highlights:

  • Omnitel Pronto Italia, Bell Atlantic's Italian wireless investment, added more than a million customers in the quarter to pass the six-million customer milestone. Omnitel is the third-largest GSM network wireless operator in Europe.

  • Grupo Iusacell in Mexico ended the quarter with approximately 755,000 subscribers, an increase of 89 percent over year-end 1997. During the year Iusacell adopted a number of Bell Atlantic Wireless Group strategies, including new customer care and billing systems and a redesigned chain of retail stores, to prepare for the arrival of new competition in Mexican wireless markets in 1999.

  • Stet Hellas, Bell Atlantic's wireless investment in Greece, added 108,000 net customers in the quarter, 130 percent higher than in fourth quarter 1997. The company ended 1998 with more than 688,000 subscribers, 76 percent higher than 1997. In November, Stet Hellas announced that Germanos S.A., Greece's largest telecommunications and electronics retailer, will distribute Stet Hellas' complete range of products and services throughout its 100-store chain.

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Bell Atlantic is at the forefront of the new communications and information industry. With more than 42 million telephone access lines and 8.6 million wireless customers worldwide, Bell Atlantic companies are premier providers of advanced wireline voice and data services, market leaders in wireless services and the world's largest publishers of directory information. Bell Atlantic companies are also among the world's largest investors in high-growth global communications markets, with operations and investments in 23 countries.

NOTE: This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Discussion of factors that may affect future results is contained in our recent filings with the Securities and Exchange Commission.

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4th Quarter 1998 Results

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